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24/06/2018
CEDA’s national dialogue on foundations for future prosperity goes to the heart of our work. What kind of Australia do we want for the future? Will we be content with a future where the limits of Government budgets define we can achieve? Or to keep dealing with the consequences of social issues in another 20 years rather than tackle their causes?
There is an alternative to the zero-sum game. We need to make impact count.
Harvard economics Professor, Michael Porter has said leaving social and environmental factors out of competition theory was a huge mistake; his work on shared value holds: "the strongest businesses of the future will be those that align making profit with creating social progress (it represents) the next stage in our understanding of markets, competition and business management."1
This is more than academic: In January, Larry Fink, CEO of global asset manager BlackRock with US$6.2 trillion under management, wrote to CEOs: "Society is demanding that companies, both public and private, serve a social purpose". Dutch pension fund PGGM, with over US$220 billion in assets reported "We are convinced financial and social returns go hand in hand."2
Impact investment – designed to deliver positive benefit for society and a financial return – is an evolution in thinking about capital markets that can fuel a revolution in how we tackle social and environmental issues.
This future is already emerging in Australia – from disability provider Hire Up to the Benevolent Society’s trial of a social impact bond, from NAB’s social bond gender equality and QBE’s Premiums 4 Good to specialist lender Social Enterprise Finance Australia and a partnership between HESTA and Social Ventures Australia.
Globally, there is much more happening than meets the Australian eye. In 2017 alone, Dutch pension funds made significant allocations to investment aligned with the UN Sustainable Development Goals, TPG launched the US$2 billion RISE fund, UBS led global work on model impact portfolios, US Reinvestment Funds’ rated bond offering for community finance was over-subscribed and development commenced for US$1 billion outcomes platforms to improve education opportunities and outcomes in Africa and India.
The Global Impact Investment Network’s eighth survey shows a diverse and growing global market where the most active 229 asset owners and managers have US$228 billion under management; five-year trend data reflects 13 per cent CAGR3 and significant growth in Asia and Oceania. Over 60 per cent of respondents indicated they are already tracking investments to the UN Sustainable Development Goals or plan to do so.
Important work on impact measurement and management is underway, including CSI’s Amplify initiative4, OECD, work on the evidence base5, the Impact Genome6 project and the Impact Management Project.7
There is an alternative to the zero-sum game. We need to make impact count.
Harvard economics Professor, Michael Porter has said leaving social and environmental factors out of competition theory was a huge mistake; his work on shared value holds: "the strongest businesses of the future will be those that align making profit with creating social progress (it represents) the next stage in our understanding of markets, competition and business management."1
This is more than academic: In January, Larry Fink, CEO of global asset manager BlackRock with US$6.2 trillion under management, wrote to CEOs: "Society is demanding that companies, both public and private, serve a social purpose". Dutch pension fund PGGM, with over US$220 billion in assets reported "We are convinced financial and social returns go hand in hand."2
Impact investment – designed to deliver positive benefit for society and a financial return – is an evolution in thinking about capital markets that can fuel a revolution in how we tackle social and environmental issues.
This future is already emerging in Australia – from disability provider Hire Up to the Benevolent Society’s trial of a social impact bond, from NAB’s social bond gender equality and QBE’s Premiums 4 Good to specialist lender Social Enterprise Finance Australia and a partnership between HESTA and Social Ventures Australia.
Globally, there is much more happening than meets the Australian eye. In 2017 alone, Dutch pension funds made significant allocations to investment aligned with the UN Sustainable Development Goals, TPG launched the US$2 billion RISE fund, UBS led global work on model impact portfolios, US Reinvestment Funds’ rated bond offering for community finance was over-subscribed and development commenced for US$1 billion outcomes platforms to improve education opportunities and outcomes in Africa and India.
The Global Impact Investment Network’s eighth survey shows a diverse and growing global market where the most active 229 asset owners and managers have US$228 billion under management; five-year trend data reflects 13 per cent CAGR3 and significant growth in Asia and Oceania. Over 60 per cent of respondents indicated they are already tracking investments to the UN Sustainable Development Goals or plan to do so.
Important work on impact measurement and management is underway, including CSI’s Amplify initiative4, OECD, work on the evidence base5, the Impact Genome6 project and the Impact Management Project.7
Nineteen countries and counting have national advisory boards comprising leaders from across sectors in working together to catalyse the field globally8. The Australian Advisory Board on Impact Investing has been at the forefront of this movement since being invited to join the G8 Taskforce in 2014. Governments from NSW to the UK, Canada, NZ, Finland, Brazil, the EU and South Korea are engaging actively.
The Financial System Inquiry and Innovation & Science Australia recommeded the government take catalytic action. Positive first steps in the 2017 and 2018 Budgets and in supportive Ministerial commentary are welcome developments. Innovative initiatives in development investment show the powerful signalling effect that can be achieved with targeted, proactive policy.
It’s time to move from an incremental wait and see approach and make sure Australia does not miss the window to drive positive outcomes at scale.
International experience has shown the effectiveness of a national impact investment wholesaler. The G8 Taskforce on Social Impact Investment9 identified this as a priority for all countries, the UK led the way followed by the EU, Portugal and South Korea and Japan are among countries with initiatives underway.
Impact Capital Australia (ICA)10 is an implementation ready opportunity for a new partnership between government, community and the finance sector that adapts global lessons for Australia. ICA will provide a go-to place to help coordinate fragmented efforts, support intermediation and demonstrate new approaches to solving social issues from housing solutions, to quality jobs for communities that have been doing it tough, to health solutions and aged care, supporting transition to the NDIS and refugee settlement.
Robust, forward-thinking engagement with this game-changing initiative will open up new and innovative horizons for social and economic reform that is fiscally responsible and contribute to the way forward for Australia’s economic and social resilience.
Endnotes
1. Kramer, M and Porter, M The New Capitalists, HBR January 2011
2. PGGM, Annual Responsible Investment Report 2017
3. https://thegiin.org/research/publication/annualsurvey2018
4. http://www.csi.edu.au/research/project/amplify-social-impact/
5. http://www.oecd.org/dac/financing-sustainable-development/development-finance-topics/social-impact-investment-initiative.htm
6. https://www.impactgenome.org/
7. http://www.impactmanagementproject.com/
8. www.gsgii.org
9.Social Impact Investment Taskforce, The Invisible Heart of Markets, 2014
10. See http://www.impactcapital.com.au/